Free is Toast

By Tien Tzuo • July 29, 2011

by Tien Tzuo

For years, consumers have enjoyed access to a world of free online content. Some industry experts thought the model would somehow last. But I’d like to declare what’s overwhelmingly obvious: the age of free is over.

Want proof? There were two stories this week that have effectively sealed the coffin on “free”:

First, Fox announced that it will only offer next day Hulu screenings to cable subscribers. Everyone else has to wait 8 days. This follows recent moves from ESPN and CNN to do the same, with some calling it “authentication.” Authentication is just the step before a full paywall. Media players now know that customers want their programs and they will pay for them, so long as you deliver them in every format and device that they carry.

Second, the New York Times announced its first quarterly results since launching its paywall. In just three months, the Grey Lady attracted more than 280,000 paying subscribers. And that directly led to the Times’ first quarter of Y-o-Y quarterly growth in almost 3 years! To quote Ryan Chittum at the Columbia Journalism Review,

But this isn’t about writing the “free” obituary. The “free” movement has always deflected the conversation form the real issue, which is how do you own the customer. In the above example, does Hulu own the customer in the above example or does Comcast? That could explain why formally hot Hulu is seeking a buyer.

The companies that succeed in the Subscription Economy are those who understand the customer better, deliver the services they want, on the devices they want, and at the right price. It’s about putting the customer at the center of your business model by delivering valuable services today (and more tomorrow) that people are loyal to and will pay for. And it’s about adopting a family of pricing plans, tailored to unique customer needs. And those needs might include a free trial, which is great, so long as it’s part of a larger pricing strategy.

It’s time for the industry to wake up. It’s never been about “free” as a strategy. It’s about the customer.